I have been conspicuously quiet about economic downturn, aka Twenty-first Century Depression, but that doesn’t mean I don’t care. Au contraire, I care a great deal. Millions of dollars worth. Yes, a year ago yours truly owned a financial statement stating a net worth in the low seven figures. Not bad, but keep in mind the majority of the balance sheet was in real estate and I’d been plugging away at my chosen career—home design and building for thirty-five years. So in essence, it really wasn’t that much for years of hard work, but then again, unlike the banks, I’m a conservative kinda guy.
On the other hand, one year later my balance sheet is in the negative high six digits and growing. In other words I’m being water boarded in a sea of red ink and being sued by a bank who was involved in this mess to boot.

But this isn’t about me. It’s about the banks and by extension the mortgage companies and by further extension, the investment banks. I think it’s safe to say they got not just you and me, but the whole country in a pickle—a giant dill pickle—and unfortunately not just us. The whole world economy is in the toilet as well, thanks to these fast and lose loaners of our money. That’s right folks, these purveyors of calamity strangled us with our own money. It’s like being shot with our own gun.
Our money? True story, it’s not their money they were recklessly giving away over the last fifteen years or so. Banks have very little of their own money and what they do have is supposed to be kept in reserve for times like these. That’s how banks operate—OPM, other peoples money. Your money, my money. I’ll give you an example. Take a fictitious bank. Some guy, call him Mr. Doe thinks he knows how to run a bank and decides to open one. He gets a federal or a state charter and then solicits investors to back him (buy stock) to raise enough money to meet reserve requirements. Then he rents, buys or builds a building and after hiring employees opens his doors and voila, he’s a bank, wise in the world of finance. We the customers, then make deposits in the form of savings and checking accounts in his bank. The bank takes our money and loans it back to us and other customers in the form of car loans, business loans, credit cards, etc.
The thing is banks are supposed to be a good thing. They’re supposed to take our money and make strong, prudent loans charging a few percentage points more for the loan than they pay their depositors and indeed some banks did and still do operate that way. That two – three percent margin is supposed to cover the bank’s operating costs and what’s left over is profit. That’s the way it’s supposed to work and when it does it’s a good thing helping the community and everyone in it grow and prosper.

So what went wrong? I’m not sure, but one thing is for sure, greed is involved along with excess. Every so often, unless held in check by regulations, greed will raise its ugly head and bite us in the rear end, like the saving and loan crises did in the eighties. If you remember, the savings and loan institutions exclusively made non-conforming, non-government backed home loans. When they were wiped out after a round of pigging out after being de-regulated, banks and other investment groups took up the slack in home loans. As it turned out this was tantamount to letting the fox guard the hen house. Only the hens was our money. Oh, sure our money was insured by the FDIC, but the country and world was not insured against recklessness. In fact it was estimated at the beginning of the year that the financial institution sponsored economic sinkhole cost the citizens of our country eleven trillion in net worth. That’s $36,666 for every man, woman and child.